With U.S. mortgage origination volume now expected to be down 41% this year to $1.1T (a prior forecast was at $1.2T), the Street was quite pleased with Ellie Mae's (ELLI +7%) Q2 beat and healthy full-year guidance: The company expects 2014 revenue of $150M-$153.5M and EPS of $0.98-$1.01 vs. a consensus of $151.1M and $0.99.
Q3 guidance is softer: Revenue of $39.5M-$41M and EPS of $0.21-$0.23 vs. a consensus of $41.1M and $0.30.
Active users of Ellie's Encompass mortgage origination software platform rose 12% Y/Y in Q2 to 99K, and active SaaS Encompass users rose 29% to 72.1K; those growth rates are down from Q1's 18% and 40%. But revenue per active user rose 3% to $410, a turnaround from Q1's 13% decline.
Contracted revenue was 61% of total revenue vs. 70% in Q1 and 49% a year ago. GAAP opex grew 12% Y/Y to $22.1M.
"We have been cautious on Ellie Mae (ELLI +0.1%) shares this year due to [the] difficult mortgage origination environment and back-end loaded nature of the revenue outlook," says analyst Raghavan Sarathy, but a recent meeting with a confident management has him upgrading to a Buy with $39 price target.
"Further, revenue growth could accelerate next year along with margin expansion as mortgage origination volume stabilizes and expense growth moderates."
The $39 price target represents 25x his team's 2016 non-GAAP EPS estimate, or a price-to-earnings-growth ratio of 0.9x.
Ellie Mae (ELLI) expects Q2 revenue of $36M-$37M and EPS of $0.20-$0.22 vs. a consensus of $36M and $0.25. Full-year guidance is for revenue of $150M-$153.5M and EPS of $0.98-$1.01 vs. a consensus of $148.4M and $1.05.
The company declares its sales pipeline to be "robust" in spite of soft 2014 mortgage volumes. The light EPS guidance is blamed on fees and new investments stemming from recent service outages.
Total users for Ellie's Encompass mortgage origination platform rose 18% Y/Y to 95K after growing 25% in Q4. Active users for the cloud/SaaS version of Encompass rose 40% to 67.4K after growing 54% in Q4.
Soft mortgage volumes and an increase in new active users led average revenue per encompass user to fall 13% Y/Y to $343.
A service outage for Ellie Mae's (ELLI -6.3%) cloud-based mortgage origination software led shares to tumble below $27 today.
Ellie says the outage appears to be due to "an external malicious attack characteristic of a distributed denial of service (DDoS)," and that it has "taken actions to isolate the suspicious activity and prevent future unwarranted access." The company adds there are no signs of a data breach.
With Ellie's software responsible for processing 20% of U.S. mortgage originations, the outage has had major ripple effects. Lenders have been prevented from closing loans and pulling up credit reports, among other things. "Our business is at a standstill," says a USA Mortgage loan officer.
After opening near breakeven in the wake of its Q4 report, Ellie Mae (ELLI +15.3%) is taking off.
With near-term expectations low on account of soft mortgage activity (Ellie Mae thinks volumes fell 14% in 2013), investors are pleased with roughly in-line Q4 results and 2014 guidance (revenue of $150M-$153.5M and EPS of $1.08-$1.11 vs. a consensus of $151.5M and $1.08). Q1 guidance is light (revenue of $30.5M-$31.5M and EPS of $0.13-$0.15 vs. a consensus of $32.6M and $0.21).
Active users of Ellie Mae's Encompass mortgage origination platform rose 25% Y/Y in Q4 to 92.2K. Weak volumes led average revenue per Encompass user to fall 21% to $327. Active users of the SaaS/cloud version of Encompass rose 54% to 63.7K.
Ellie Mae has frequently been the subject of M&A reports and speculation in recent months.
Ellie Mae Inc together with its subsidiaries is a provider of on-demand software solutions & services for residential mortgage industry. Its mortgage management solutions help streamline & automate the process of originating & funding new mortgage loans.